In a previous article I discussed how to conduct an effective board meeting. One of the main elements discussed in making board meetings effective was management presentations. In this article I will explain why most management presentations to the board are less than useful and how the board can help change that. It is a continuation of my discussion on operational corporate governance.
The first misunderstanding is assuming that a management presentation means a PowerPoint presentation. It doesn’t. PowerPoint presentations can certainly be part of the management presentation, but cannot be the sole document as PowerPoint, or any other visual slide presentation software, does not have the ability to present the full depth and breadth of information needed. For this reason it is better to call it the management pack so as avoid any confusion.
To develop a better idea of what the pack should look like a basic look at the information required by a board of directors is helpful. The board needs information on the performance of the company in the past quarter. This is not restricted only to financial performance but should include all key performance indicators (KPIs), which if the board hasn’t selected then shame on them.
Non-financial KPIs could include external indicators such as client satisfaction survey’s, market share and brand perception. Internal indicators could include employee surveys, employee turnover numbers and quality measures such as number of defects per 1,000 production units. These are of course just examples, the breadth of non-financial KPIs is vast.
Without non-financial KPIs there really is no way to set targets other than “Your P/L next quarter needs to be $X.”
Financial information needs to be far more informative than simply showing the variance to the budget with a couple of bullet points explaining (excusing?) the difference. There needs to be a full understanding of why there was a variance, usually explained either by incorrect forecasts or missed drivers of the financial model. There then needs to be a clear plan on how to remedy the budgeting process as well as the actual business issue.
If the above is not done, then the board is doomed to meeting after meeting of “This quarter, we missed our targets because of [excuse de jour] and it is not our fault.”
The final piece of backward looking information relates to non-company specific issues: competitive landscape, market trends, the overall economy. The last one is conspicuously absent in many board packs. How is a board supposed to make decisions about the company if they don’t have information on the economic environment? There usually is little overhead in compiling this information as it can usually be sourced or bought relatively cheaply.
Without a doubt the greatest failures of boards lies in not have the right information at the right time. Fortunately, it doesn’t take much to get that information.